Illovo Sugar demands K431million from Simama

…. court dismisses Simama General Dealers application

The commercial division High Court on christmas eve threw out an application by Simama General Dealers asking the court to dismiss a claim of US$319 608 (K435m)  Illovo Sugar is demanding from the company.

Simama wanted the court to throw the case on the basis that there was no enforceable contract since the tenancy agreement between the two parties contravened Regulation 2 (a) of the Exchange Control (Use of Foreign Currencies in Local Transactions) Regulations.

Simama and Illovo Sugar, according to the Court, entered into an agreement to rent space in April 2012 and the rent was priced at US$3.00 per square metres for warehouse space.

“It is the claimant contention that the defendant represented that the warehouse had an area of 4000 square metres in size and proceeded to pay rentals on that basis.  However after sometime and having already made a number of payments, it was discovered by the claimant that in actual fact the size of the warehouse was only 1149.01 square metres,”  said Justice John Katsala in his summary of facts.

The two parties on 20 June 2017 amended the agreement to reflect the 1149.01 square metres as the size  of the warehouse.

Illovo Sugar them proceeded to demand USD 319 608, being the amount of money paid in respect of the excess 2850.99 square metres from April 2012.

Simama refused to pay and Illovo Sugar dragged the company to court asking for the amount, costs and debt collection charges plus interest.

In defence Simama claimed the company rented out to Illovo Sugar space at K1.8 million a month and the amendment in 2017 was based on the less space being required by the Sugar manufacturer.

Simama then applied to court to dismiss Illovo Sugar claim since the tenancy agreement contravened the exchange control rules which prohibits the quotation or the acceptance of quotation  of prices in foriegn currency, hence the claim is unforceable.

In his ruling Justice Katsala said the rules prohibit transacting in foreign currency for goods and services provided in Malawi. He said the rule is premised on payment in foreign currency.

He observed that in the case of Simama said rental fees was priced at USD3.00 per square metre but all invoices and payments were quoted and effected in Malawi Kwacha at K1.8million a month.

The Judge ruled for the regulations to be breached there must be an intention to pay or demand payment in foreign  currency.

Justice Katsala noted that in the absence of full evidence it was impossible for the court to determine whether there was a breach or not as Illovo Sugar claims the USD3.00 was used to indexing purposes.

The Judge then dismissed the application with costs to Simama saying the issues raised can only be determined upon conducting full trial.

Bishop Abraham Simama, Chairman of the company and Anthony Mwakanema, Warehouse Manager for Illovo  Sugar presented  affidavits used in the matter.

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